Legislators hash out tax reform at forum

At a forum Thursday evening, three of Grant County’s state legislators discussed tax reform, its urgency and what that reform might look like.

Leading into the special session of the New Mexico Legislature in April, Gov. Susana Martinez called for legislators to consider sweeping tax reform rather than simply balance the state budget for fiscal year 2018. The Legislature, however, paid an existing reform bill that had been introduced during the regular session little attention, instead focusing on just the budget in crisis.

At Thursday’s forum, Democratic District 28 state Sen. Howie Morales said that was because he and many other legislators still had a bad taste in their mouths over the last time a big tax move was rushed through the Roundhouse — 2013’s much-maligned corporate tax cuts. Morales said that cut’s promised $72 million budget boost turned out to actually be a $72 million budget hit. The senator posited that mistake would have been caught had the Legislature taken the appropriate time to review the bill.

“Because of that, there were a lot of concerns,” Morales said. “We can’t have legislation that flies through, especially in a special session of two days. There needs to be tax overhaul. We need to have those discussions. But even on the fiscal impact reports, it said, ‘It is impossible to score precisely the fiscal impact of this bill or any bill of this magnitude due to the limitations of the data.’ There was nothing saying it would have a positive or negative impact to the state budget.”

Morales sits on the Senate Finance Committee and said the reform bill had faced widespread opposition in that committee’s meetings as well.

“Everyone from ranchers to educators to people in the private sector lined up in our committee chamber in opposition to it because of the impact it would have,” he said. “It would impact hospitals, schools and local government because it would be pulling out those tax breaks given there. Nonprofits would be hit very hard. It was an eye-opener that this legislation couldn’t go through, both on the Democratic and Republican sides of the Senate.”

Panel moderator Thomas Durham asked the legislators if they thought the reform bill introduced in the last two sessions had a future.

“Can it be salvaged? I think we can save pieces of it,” Morales said. “But we can’t impact areas of the state that rely most on these tax breaks.”

Democratic District 39 state Rep. Rudy Martinez, too, said the reform needed more time, and that the special session was the wrong time for it.

“Tax reform is going to take the Legislature a number of sessions, including bringing in experts to give the Legislature analysis and data on what direction needs to be taken to improve the tax structure in New Mexico,” he said. “You can’t come in with a 430-page-long bill that was not provided to all legislators until the last day of a special session.”

Freshman Republican District 38 state Rep. Rebecca Dow, however, has been the most vocal proponent of timely tax reform of the three legislators on the panel. She said that a significant amount of work and time have been put into the bill, and that putting it off repeatedly has just extended the problems the state faces.

“In the regular 60-day session, there were amendments, discussions and committees,” Dow said. “This had been worked on for over a year. This wasn’t new. During the special session, though, it wasn’t on the table. There was no interest in discussing it. And there are sticking points on both sides. I wish it had gone past the one committee. When you take out a change in corporate tax or food tax, we aren’t considering every option. I started my first 60-day session trying to fill the gap left by the last special session. We’re going to keep having that happen until we come up with reasonable reform.”

As with most tax discussions in New Mexico, this one returned again and again to the state’s corporate tax cuts enacted in 2013. Those cuts were part of an 11th-hour move at the end of the 2013 session — according to Morales, “literally in the last seconds.” To fund the corporate tax cuts, legislators approved the phaseout of Hold Harmless payments to local governments. These payments were originally designed to make up the money lost by municipalities after a 2010 decision to remove gross receipts taxes from food and health care. That phaseout hits the town of Silver City more than any other municipality in the state, since it is unusually dependent on food and health care spending.

“The perception of lowering the tax rates for corporations was supposed to bring bunches of businesses over into New Mexico,” Martinez said. “That didn’t happen. We’re suffering now. That is one of the issues that has had a big impact on how we are now financially in the state of New Mexico.”

Dow said she agreed that corporate taxes are one of many things that must be involved in the tax reform discussions, but that those discussions must begin again now and continue until the Legislature has a plan.

“If lowering the corporate tax rate didn’t bring in businesses, then what is it? Because those are real incentives,” Dow said. “Is it licensure, the cost of doing business? We have to talk about this, because in the long term, we are putting a band-aid on an empty gas gauge until we get together and come up with a solution. We don’t have to wait until the next special session or regular session to talk about it. We have interim committees and are working on these things all the time.”

Dow said the Legislature also needs to take a close look at gross receipts taxes on food sales, which were eliminated during Gov. Bill Richardson’s administration in an attempt to remove a burden from low-income New Mexicans. Dow said that comprehensive examination never happened, and that has caused widespread turmoil.

“The corporate tax was a sticking point on one side and the food tax was on the other,” she said. “Since food tax was repealed, low-income families who were exempt on their SNAP or food stamps wouldn’t have paid that anyway. With Hold Harmless and then its repeal, municipalities, then, are passing their own gross receipts taxes on non-food items, because they don’t have a stable tax base. So the research is out now that low-income families are actually paying around $120 to $160 a year [more] on taxes on non-food items. And yet we are missing that on tourists who come through and spend that money.”

The forum at Western New Mexico University Thursday night was part of a regular monthly series organized by WNMU’s Miller Library, WNMU MEChA and the Grant County Democratic Party, but this time included the Republican representative, which attracted a larger-than-usual crowd in both size and diversity.